CFA Level I · CFA Level I Exam · Fixed-Income Markets for Government Issuers
Supranational bonds are most likely to have strong credit quality because:
Supranational bonds typically have strong credit quality because member countries supply capital and support, and the institutions lend to creditworthy borrowers. They are not guaranteed by one sovereign and still face market risks such as interest rate changes.
- Atheir member countries provide capital and support, and the lending is to creditworthy borrowersCorrect
- Bthey are guaranteed by a single sovereign government
- Cthey are exempt from all market risk
Explanation
Supranationals are supported by paid-in and callable capital from member countries and usually lend to creditworthy governments and projects, giving them high ratings. They are not backed by one sovereign, and they remain exposed to interest rate risk.
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